Parts Ш and IV further develop our claim that full priority can produce significant efficiency costs and respond in detail to criticisms of this claim. Part III focuses on the excessive use of security interests that results from full priority, and Part IV describes the other types of efficiency costs associated with full priority.
Part V describes three partial priority rules that could be considered as alternatives to full priority and the current system of de facto partial priority. In addition to the two partial priority rules that we considered in The Uneasy Case, we put forward for consideration, a third partial priority rule: giving a secured creditor priority in its collateral in bankruptcy only over the claims of unsecured creditors that have explicitly consented to be subordinated.
After describing how priority might be implemented, we turn to the third and fourth objections that critics of our analysis have raised. Part VI addresses the objection that partial priority rules such as the ones we present would reduce the availability of financing for desirable investments. Part VII addresses the objection that creditors can circumvent a partial priority rule (a) by the use of alternative arrangements which operate like security interests under full priority but which are beyond the reach of the rule; and (b) by secured creditors recovering their collateral outside of, or prior to, bankruptcy.
Finally, before concluding, Part VIII remarks on how our analysis relates to the current controversies over the revision of Article 9 and the “carve-out” proposal.